UK economy flatlines in September, official figures show
The weakness suggests that the UK economy is slowing ahead of Brexit next year
The update followed zero GDP growth in August, and the weakness suggests the UK economy is slowing ahead of next year’s Brexit.
The European Commission predicted this week the UK will be set for the worst rate of growth of any European Union economy over the next two years, and that is assuming a smooth Brexit.
However, growth in July was 0.3 per cent, boosted by retail spending during the heatwave, which helped take the rate of growth for the third quarter to 0.6 per cent, the fastest since the final quarter of 2016.
“It remains likely that the stronger growth recorded in the third quarter is a one-off for the UK economy, with persistent Brexit uncertainty and the financial squeeze on consumers and businesses likely to weigh increasingly on economic activity in the coming quarters,” said Suren Thiru of the British Chambers of Commerce.
The ONS reported, in September UK manufacturing grew 0.2 per cent following a slight contraction in August. Construction grew 1.7 per cent after deep falls in output during the snowstorms early this year.
But services, which make up the bulk of the UK economy, contracted 0.1 per cent during the month.
In the third quarter, business investment fell 1.2 per cent, the worst three-month performance since early 2016.
It was also the third quarter of contraction in a row – marking the worst run since the last recession.
Surveys suggest Brexit-related uncertainty is causing firms to freeze spending.
Worst run in a decade
The Bank of England expects growth in the final quarter to decelerate to 0.3 per cent.
However, there was slightly better news from the ONS on UK trade, with the statistics agency reporting the trade deficit fell to £2.9bn in the three months to September, down from £6.1bn.
Export values were up 3.8 per cent in the period, outstripping import growth of 1.7 per cent.
Net trade is therefore estimated to have provided a 0.8 percentage point boost to overall GDP growth in Q3, after dragging in the second quarter.
Chancellor Philip Hammond sought to accentuate the positive elements in the data, arguing the quarterly growth rate was evidence of the “underlying strength in our economy”.
Speaking on a visit to Fuller’s Brewery in London, Mr Hammond said: “We are building an economy that works for everyone, with 3.3 million more people in work, lower unemployment in every part of the country, and wages rising at their fastest pace in almost a decade. Now our focus is on locking in this progress and ensuring people’s wages can continue to rise.”